California’s Homeowners Bill of Rights will add an estimated $30,000 of legal exposure into each and every non-judicial foreclosure, according to a white paper released by Robert L. Jackson and Associates.
Intended to educate loan servicing professionals and the financial institutions that hire them, the white paper states that the new law will change long-standing legal doctrines in the state.
The new law will also make compliance with its provisions nothing more than a very expensive defense to borrower claims of wrongful foreclosure, the white paper stated, while encouraging such claims through its private right of action.
“The industry’s focus on procedurally complying with the Homeowners Bill of Rights is misplaced,” said Scott J. Jackson, executive vice president of the firm.
The white paper concludes that the Homeowners Bill of Rights “effectively kills” the non-judicial foreclosure process it originally intended to reform. The paper states that the new law makes judicial foreclosures a cost-effective and time-efficient alternative.
“The new law strips away protective legal doctrines that an entire generation of servicing professionals have come to rely on, making it much more difficult and significantly more expensive to resolve claims brought under the new law,” Jackson said.
The active listings of detached homes from La Jolla to Carlsbad:
Date
NSDCC Listings
Avg. LP $$/sf
Jan 14
649
$722/sf
Feb 4
667
$716/sf
Feb 10
679
$713/sf
Feb 25
678
$719/sf
March 6
727
$703/sf
In February, there were 369 new listings, and 297 listings that went pending (not counting contingents) – slightly slower than our last reading of early February when it was a 1:1 ratio of new listings to pendings.
The average list price of February’s pendings was $439/sf, so it is the higher-end product that is sluggish.
It wouldn’t take much to slow this train down.
If we have 15-20 Carmel Valley resale homes under $1,000,000 get listed in March, it would soak up some of the demand, and leave everyone else wondering what to expect. But that is a big IF – only two have listed so far, one at $979,000 and the other at $999,999.
As of tonight, this REO is still marked as an active listing. Yet the agent responded with the typical supreme confidence that permeates the business these days.
He sent this via a text message, “Sorry, but you’re way too late to this party. We had 30 offers. The bank has selected one.”
Hat tip to Drum Bob for sendingthisin on boomers – an excerpt:
According to data from the American Housing Survey, from 1989 and 2009, 80 percent of new homes built in that era were detached single-family homes. A third of them were larger than 2,500 square feet. And most startling – “I checked my numbers over and over again,” a bemused Nelson says – 40 percent were built on lots of half an acre to 10 acres in size. Now, he says, 74 percent of new housing demand will come from the people who bought these homes, now empty-nesters, wanting to downsize.
A vast majority of today’s households with children still want such houses, Nelson says. But about a quarter of them want something else, like condos and urban townhouses. That demand “used to be almost zero percent, and if it’s now 25 percent,” Nelson says, “that’s a small share of the market but a huge shift in the market.” And this is half of the reason why many baby boomers may not find buyers for their homes. “Even if the numbers matched,” Nelson says, “the preferences don’t.”
Demographics will further complicate this picture. We’re moving toward a future in America when minorities will become the majority. But given entrenched educational achievement gaps, particularly for the fast-growing Hispanic population, Nelson fears that the U.S. is not doing a good job educating the “new majority” to make the kinds of incomes that will be required to buy the homes we’ve already built.
As the Hispanic population expands, and more baby boomers retire, the gap between the two groups in the housing market – expressed in unsellable houses – will only widen.
“That’s going to hit us,” Nelson says. “Not right now. But my guess is that about the turn of the decade, that number will become a real number. It’s only a few percentage points now, but it’s like a glacier, and if it keeps moving and building and growing, it’s going to be a big number in about 2020.”
Roughly 7 percent of over-65 households move each year, and as people get older, their likelihood of moving from owning to renting gets higher and higher (it’s about 79 percent for households over 85). By 2020, there were will be around 35 million over-65 households in the U.S. That year, Nelson calculates, seniors who would like to become renters will be trying to sell about 200,000 more owner-occupied homes than there will be new households entering the market to buy them. By 2030, that figure could rise to half a million housing units a year.
“Between changing preferences and declining median household income because of poor education – because we’re not willing to spend money on education,” Nelson says, “that means we can predict the next housing crash, and that’ll be in about 2020.”
In that environment, he says, there will be two classes of seniors in America: those “aging in place” voluntarily, and those “aging in place” involuntarily because they can’t sell their homes. Nelson is critical that “aging in place” will really be feasible for many seniors.
“It’s romantic for the first 15 years when you’re turning 65 and retired,” he says. “But aging in place among 90-year-olds? 95-year-olds?” Many of these people, he predicts, won’t realize that they can’t mow the lawn or pay for repairs until they’re really elderly, and the market for the their homes has collapsed even further. “My suspicion,” Nelson says, “is that many hundreds of thousands, maybe millions of those households in the 2020s to 2030 and beyond will simply give up the house and walk away.”
Over the past two decades, a net 3.4 million people have moved out of California for other states. But contrary to conservative lore, there has been no millionaires’ march to Texas or other states with no income tax.
In fact, since 2005 California has experienced a net in-migration of households earning more than $200,000, according to the U.S. Census American Community Survey.
California Outmigration by Income, 2005-2011
Ann. Income
# of Outbound Migrants
0-$20,000
238,400
$20-$40,000
322,500
$40-$60,000
235,500
$60-$80,000
137,700
$80-$100,000
45,900
$100-$200,000
23,200
$200,000+
-3,000
As it happens, most of California’s outward-bound migrants are low- to middle-income, with relatively little education: those typically employed in agriculture, construction, manufacturing, hospitality and to some extent natural-resource extraction. Their median household income is about $40,000—two-thirds of the statewide median—and about 95% earn less than $80,000. Only one in 10 has a college degree, compared with 30% of California’s population. Roughly 40% of the people leaving are Hispanic.
Read the rest of the article here, and/or watch the video:
Scroll over areas to see Zillow’s estimate of those underwater, and the percentage of those that are delinquent. Even in the worst-affected areas, the vast majority of underwater homeowners are making payments.
For those who are wondering, 42 homes have been foreclosed this year in NSDCC, an area of 100,000+ homes.
Peak pricing is approaching in several spots – how much higher will it go?
Buyers would love to see the sales momentum get disrupted, and if something happens they will be happy to hit the brakes. At the same time, those gambling sellers who waited too long will jump in at the last minute. The frenzy could stop on a dime.
In terms of a housing recovery, San Diego is moving like a swift tortoise but not quite a hare, the president of Meyers LLC said at Conversations 2013, hosted by the North San Diego County Association of Realtors.
“We are truly in a recovery,” Timothy Sullivan added. “The race has begun and I think we can say that basically the tortoise has jumped on the hare’s back, slowing him down. But we’re moving in the right direction and certainly moving faster than the tortoise would go.”
The good news, Sullivan said, is job growth, a lack of supply and great quality of life. But the bad news is affordability; home prices are too high relative to income and it’s expensive to develop.
While the economy and housing market are improving and “everything is moving in the right direction,” Sullivan said there are external challenges, such as restrictions on land use and the cost of development. Also, on a macro basis, sequestration cuts took effect Friday, the date of the event. Economic fundamentals, such as employment and consumer confidence, are improving, he said.
“We will not have a full recovery without housing participating,” Sullivan said. “For us to really have meaningful impact on the GDP of our country and the GDMP of our region, we’re going to have to see activity more than double from where we are now.”
There are 150,000 unsold homes, the lowest Sullivan said he’s seen in four years. There were 5,500 residential building permits in 2012 and Sullivan expects 2013 to record a little more than 6,000.
“Based on demand, we should be more than double that,” Sullivan said.
There are 250,000 people expected to enter the marker over the next five years and 90,000 households are forecast to be created. “Where are we going to put them?” Sullivan asked. San Diego “burned through” its excess supply and now it’s difficult to find any property, he said.
“We are not anywhere close to replacing the housing that we need,” Sullivan said. “The housing that we’re bringing in is almost replacement housing. It’s not there for our new additions – for the people who want to move in here.”
The lot inventory is also changing, he said. Lots that were once B locations are now A’s, and C locations are now B’s. In San Diego, Sullivan said a B location could be Murrieta and a C location could be close to the desert. The available supply of lots is in the outlying areas, he said, and the best locations are gone.
The new consumer is concerned about a lack of supply and housing is being pursued again, Sullivan said. The active adult, who Sullivan said is the “ultimate discretionary buyer,” is buying again and single family detached is still necessary.
Job growth leads to housing vacancies filled, and then demand exceeds supply – which is where San Diego is, Sullivan said. Job growth is the single most important thing, he said, because without a job, people won’t buy a home. Next, rents and home prices rise, and finally construction returns to normal, and that’s a sign that the market has normalized.
“In San Diego, I don’t think we’ll ever see a normal market again,” Sullivan said.
Sullivan suggested that the real estate professionals in the audience know their consumer – the consumer’s wants, needs and what they will pay for. He advised them to monitor macro trends, which he called “the wind in the sale.”
“If we can continue our economic growth, you will see more activity in sales,” Sullivan said.
Sullivan forecast a 33 percent growth in new home sales to 487,000, and to 629,000 in 2014. He said the improving economy will help move people who have been sitting on the fence about selling a home.
Sullivan said the economy needs three things for a recovery: jobs, filled vacancies and confidence. He said San Diego has job growth and filled vacancies but said his confidence is “shaking.” “I don’t see clearly what’s going to happen this next year with sequestration and other challenges.”
The lower-end average pricing has been steadily rising about 1% per month, resulting in 10% to 12% annual appreciation (the Under-$1,000,000 market saw a 12.8% gain in their average pricing for Feb. 2013).
NSDCC Detached-Home Sales for February
Under $1M
Feb. Sales
Avg $/sf
2010
90
$327
2011
99
$306
2012
123
$288
2013
104
$325
The lower-end appreciation should continue because it will take months or years to satisfy the demand when there are 10, 20, 30 or more buyers for each house. The higher-end pricing hasn’t been quite as frothy:
Over $1M
Feb. Sales
Avg $/sf
2010
53
$461
2011
67
$483
2012
56
$504
2013
75
$503
There are 718 active listings, and their list prices are averaging $697/sf. The inventory is top-heavy though; only 157 of those are priced under $1,000,000. There are 561 houses for sale priced over $1 million!
Photo taken five minutes after an open house began yesterday – note that the booties crate is already empty. There were another five realtors waiting for their buyers outside:
The new law will also make compliance with its provisions nothing more than a very expensive defense to borrower claims of wrongful foreclosure, the white paper stated, while encouraging such claims through its private right of action.
Demographics will further complicate this picture. We’re moving toward a future in America when minorities will become the majority. But given entrenched educational achievement gaps, particularly for the fast-growing Hispanic population, Nelson fears that the U.S. is not doing a good job educating the “new majority” to make the kinds of incomes that will be required to buy the homes we’ve already built.
“We are truly in a recovery,” Timothy Sullivan added. “The race has begun and I think we can say that basically the tortoise has jumped on the hare’s back, slowing him down. But we’re moving in the right direction and certainly moving faster than the tortoise would go.”
